Payroll Tax Obligations: Form 941, FUTA (940), State Withholding, and Deposit Schedules

By Yarik Yarosh, CPA ·September 5, 2026 ·9 min read

Written by Yarik Yarosh, CPA (US & Canada) September 5, 2026 · FL CPA license AC61704 · CPA Ontario

Payroll taxes are the most time-sensitive and penalty-heavy obligations a small business faces. When an employer pays wages, three types of federal tax are triggered: (1) the employee’s share of FICA (7.65%, withheld from the paycheck), (2) the employer’s share of FICA (7.65%, paid by the employer), and (3) federal income tax withholding (based on the employee’s W-4). These amounts must be deposited with the IRS on a schedule determined by the business’s total payroll tax liability (monthly or semi-weekly). The deposits are reported on Form 941 (quarterly). A separate tax, FUTA (Federal Unemployment Tax Act), is reported on Form 940 (annually) and is paid entirely by the employer at an effective rate of 0.6% on the first $7,000 of each employee’s wages. The trust fund recovery penalty under IRC 6672 makes officers, directors, and other “responsible persons” personally liable for unpaid employee withholding taxes.

✓Key takeaway

Federal payroll tax summary:

Tax	Rate	Who Pays	Wage Base	Form
Social Security (employee)	6.2%	Withheld from employee	$176,100 (2025)	941
Social Security (employer)	6.2%	Employer pays	$176,100 (2025)	941
Medicare (employee)	1.45%	Withheld from employee	No limit	941
Medicare (employer)	1.45%	Employer pays	No limit	941
Additional Medicare (employee)	0.9%	Withheld from employee	Above $200,000	941
Federal income tax	Per W-4	Withheld from employee	No limit	941
FUTA (employer only)	6.0% - 5.4% credit = 0.6%	Employer pays	$7,000 per employee	940

Deposit schedules:

Schedule	When to Deposit	Applies When
Monthly	By the 15th of the following month	Total payroll tax liability was $50,000 or less in the lookback period
Semi-weekly (Wed-Fri payroll)	By the following Wednesday	Total liability exceeded $50,000 in lookback period
Semi-weekly (Sat-Tue payroll)	By the following Friday	Same
Next business day	Within 1 business day	Any single deposit obligation of $100,000+

Annual payroll tax calendar:

Date	Obligation
January 31	W-2s to employees; W-3 + Copy A to SSA; Form 940 due; Q4 Form 941 due
February 28/March 31	1099s to IRS (paper Feb 28, electronic March 31)
April 30	Q1 Form 941 due
July 31	Q2 Form 941 due
October 31	Q3 Form 941 due

Trust fund recovery penalty (IRC 6672): The employee’s share of FICA and withheld income tax are “trust fund taxes.” The employer holds them in trust for the government. If not deposited:

The IRS assesses a 100% penalty equal to the unpaid trust fund taxes
The penalty applies to ANY “responsible person” who willfully failed to collect, account for, or pay
Responsible persons include: owners, officers, bookkeepers, payroll processors with check-signing authority
The penalty is PERSONAL (pierces the corporate veil)
Not dischargeable in bankruptcy

What does payroll compliance look like for a small business?

Hypothetical example

Round numbers. A plumbing contractor. S-Corp. Owner + 3 employees.

Payroll details:

Employee	Annual Salary	Pay Frequency
Owner	$60,000	Bi-weekly ($2,308/pay)
Plumber 1	$55,000	Bi-weekly ($2,115/pay)
Plumber 2	$50,000	Bi-weekly ($1,923/pay)
Office admin	$40,000	Bi-weekly ($1,538/pay)
Total	$205,000

Per-paycheck employer obligations (bi-weekly):

Tax	Rate	Per Paycheck (all 4 employees)
Employer Social Security (6.2%)	6.2% x $7,884	$489
Employer Medicare (1.45%)	1.45% x $7,884	$114
Employee Social Security (withheld)	6.2% x $7,884	$489
Employee Medicare (withheld)	1.45% x $7,884	$114
Federal income tax (withheld, estimated)	~15% average	$1,183
Total per paycheck		$2,389

Bi-weekly deposit to IRS: $2,389 Annual total: $2,389 x 26 pay periods = $62,114

Of that $62,114:

Employer’s cost (employer FICA): $15,683/year
Employee’s cost (withheld from pay): $46,431/year (employees see this as reduced take-home pay)

FUTA tax (Form 940):

Employee	First $7,000 in wages	FUTA (0.6%)
Owner	$7,000	$42
Plumber 1	$7,000	$42
Plumber 2	$7,000	$42
Office admin	$7,000	$42
Total	$28,000	$168

FUTA is due quarterly if the cumulative liability exceeds $500. For 4 employees, the full $168 is typically deposited with the Q1 Form 941 payment.

State payroll taxes (Florida example): Florida has no state income tax, so no state withholding. But:

State Tax	Rate	Wage Base	Annual Cost
FL Reemployment Tax (unemployment)	2.7% (new employer rate)	$7,000 per employee	$756

After 3+ years with no claims, the rate can drop to 0.1% ($28/year total).

Total annual payroll tax cost to the employer:

Tax	Amount
Employer FICA (SS + Medicare)	$15,683
FUTA	$168
State unemployment	$756
Workers’ comp (plumbing, NCCI 5183)	$12,000 (estimated)
Total employer payroll taxes + insurance	$28,607

This is 14% of total payroll ($28,607 / $205,000). For every $1 in wages, the employer pays $0.14 in payroll taxes and insurance.

Using a payroll service (recommended):

Service	Monthly Cost	What’s Included
Gusto	$40 + $6/person = $64/month	Tax deposits, Form 941, W-2s, direct deposit
ADP Run	$59 + $4/person = $75/month	Same + HR tools
Square Payroll	$35 + $6/person = $59/month	Same, simpler interface
DIY (manual)	$0	Nothing automated, high risk of errors/penalties

Annual payroll service cost: $768-$900 Cost of one missed deposit penalty: $500-$5,000+ The payroll service pays for itself by avoiding a single penalty.

Common payroll mistakes and their penalties:

Mistake	Penalty
Late deposit (1-5 days)	2% of deposit
Late deposit (6-15 days)	5% of deposit
Late deposit (16+ days)	10% of deposit
Late Form 941 (up to 15 days)	2% of tax due
Late Form 941 (16+ days to 5 months)	5-15% of tax due
Not filing Form 941 (6+ months)	25% of tax due
Trust fund recovery penalty	100% of withheld taxes (personal liability)
Misclassifying employees as contractors	Back taxes + penalties + interest (all years open)

The trust fund penalty scenario: The S-Corp falls behind on payroll deposits. After 3 months, $18,000 in trust fund taxes (employee withholding) are unpaid.

The IRS assesses the Trust Fund Recovery Penalty:

Assessment	Amount
Unpaid trust fund taxes	$18,000
Trust fund recovery penalty (100%)	$18,000
Applied to: S-Corp owner (responsible person)	$18,000 PERSONAL liability

The owner’s personal bank account, personal property, and personal wages can be levied. This liability survives bankruptcy. This is why payroll taxes must always be the first bill paid, before rent, before materials, before anything else.

S-Corp owner’s own payroll: The S-Corp owner must be on payroll. The owner cannot:

Take distributions without a salary (reasonable compensation violation)
Pay salary annually instead of through regular payroll (creates deposit timing issues)
Use 1099 for the owner (owner of an S-Corp is always W-2)

Minimum payroll frequency for S-Corp owners: quarterly (though monthly or bi-weekly is standard).

Illustrative numbers only, not a real client and not advice for your facts.

What are the penalties for late payroll tax deposits?

The IRS imposes graduated penalties for late payroll tax deposits: 2% if 1-5 days late, 5% if 6-15 days late, 10% if more than 15 days late, and 15% if still unpaid 10 days after the first IRS notice. These percentages apply to the unpaid deposit amount. The trust fund recovery penalty (IRC 6672) can hold owners, officers, and even bookkeepers personally liable for the employee’s share of unpaid payroll taxes, piercing the corporate veil entirely. This is one of the few tax penalties that cannot be discharged in bankruptcy.

How do I determine my payroll deposit schedule?

The IRS assigns businesses to either a monthly or semi-weekly deposit schedule based on the lookback period (the four quarters ending June 30 of the prior year). If total employment taxes during the lookback period were $50,000 or less, deposits are due monthly (by the 15th of the following month). Above $50,000, deposits follow a semi-weekly schedule (Wednesday/Friday based on payday). New businesses default to monthly. The schedule resets each calendar year. Regardless of schedule, accumulating $100,000 or more in undeposited taxes on any day triggers a next-business-day deposit requirement.

Related guides:

Payroll Tax Basics: Form 941, Form 940, and Employer Tax Obligations

What payroll tax deposits are required and when are they due?

Federal payroll tax deposits include withheld income tax plus both the employee and employer shares of FICA (Social Security and Medicare), and the deposit schedule depends on your total tax liability. Monthly depositors must deposit employment taxes by the 15th of the following month, while semi-weekly depositors must deposit by Wednesday for Saturday-Tuesday paydays and by Friday for Wednesday-Friday paydays. The IRS assigns your deposit schedule based on your lookback period liability (the four quarters ending June 30 of the prior year): $50,000 or less means monthly, over $50,000 means semi-weekly. The $100,000 next-day deposit rule applies regardless of your regular schedule. If you accumulate $100,000 or more in employment taxes on any day, you must deposit by the next business day and switch to semi-weekly status for the remainder of the year and the following year.

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Cite this page

Yarik Yarosh, CPA. "Payroll Tax Obligations: Form 941, FUTA (940), State Withholding, and Deposit Schedules." Blue Cloud CPA, September 5, 2026. https://bluecloudcpa.com/guides/small-business-payroll-tax-obligations-form-941-940

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.